Factors Influencing Organizational Design
External Environment
The first factor to influence an organization's design will be that of the external environment. The external environment consists of everything outside of organizations that can affect their performance and outcomes. Availability and need for raw materials, human resources, and financial resources are elements of the environment. Further key elements include customers and suppliers, competitors, cultural factors, and the types of regulatory frameworks or governmental influences on the organization.
The greater the number of external forces, the greater the complexity of the external environment. A pharmaceutical company operates in a very complex environment dealing with many groups such as doctors, hospitals, pharmacists, external research establishments, regulators, health insurance providers, labor markets, and many suppliers. In addition, a pharmaceutical company would deal with these groups in many countries with varying local economic conditions, health care arrangements, and regulatory regimes.
Environmental stability refers to how stable all of the environmental forces are over time. There was a time when certain external forces were considered stable, such as governmental regulations and laws, which could continue for many years, even with new political administrations in place. However, the financial crisis of 2008 and political changes in the United States have added volatility. The high-tech and software industries would be considered unstable because of the relative ease for new software and technology companies to enter and take over an existing market.